- ConocoPhillips(COP) has become the third-largest US oil company as a result of investments such as a 20% stake it acquired in Russia’s Lukoil for $7.5 billion in 2005.Bernard Picchi of Wall Street Access said ConocoPhillips shares could reach $85 a year from now.

- Sepracor Inc.(SEPR) will be more profitable than analysts’ consensus, citing Robert Hazlett of BMO Capital Markets Corp.

BOTTOM LINE:Asian indices are higher, boosted by technology and commodity stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs and Retail longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is mildly higher, most sectors are higher and volume is heavy.In today's manic market where a short-sited pessimistic day trading mentality still rules the day, we jump from recession fears to boom fears almost overnight. While some recent data are indicating a sharp acceleration in U.S. economic activity, other data points are more muted. Moreover, the effects of the recent rise in the 10-year yield are already taking hold. The average 30-year mortgage rate has jumped from 6.11% in December to 6.42% last week. Moreover, mortgage applications fell -7.3% last week, the worst decline since January. On top of this, global growth, while still very high, is decelerating, not accelerating. I believe it is unlikely the 10-year yield will move substantially higher from current levels. Maybe the economy isn't too hot or too cold again, but just about right. I plan to add to my core iShares Lehman 20+ Year Treasury Bond (TLT) long on any substantial move higher in the 10-year yield from current levels. Bloomberg is reporting today that Royal Dutch Shell and Vitol Group are among companies that are hiring supertankers to hoard up to 20 million barrels of oil in the Gulf of Mexico due to the fact that U.S. onshore storage is completely full. Oil companies have hired at least 10 supertankers for storage, according to the report.An analyst at BNP Paribas said that storing the oil on tankers is a "cheaper alternative" than trying to deliver to a market that "may not want the incremental barrels now." This could be one of the reasons oil is coming under pressure again today.Moreover, demand destruction is pervasive, China's bubble is poised to burst, the U.S. dollar is firming, alternatives are exploding onto the scene like never before, conservation is taking hold, global spare production capacity is rising and the risk premium is shrinking.I still expect oil to head into the 40s before year-end.I expect US stocks to trade mixed-to-higher into the close from current levels on buyout speculation, stabilizing long-term rates, short-covering and investment manager performance anxiety.

- Chicago Purchasing Manager for May rose to 61.7 versus estimates of 54.0 and 52.9 the prior month.

- Construction Spending for April rose .1% versus estimates of unch. and an upwardly revised .6% increase the prior month.

BOTTOM LINE:The US economy grew at a slower pace than previously thought in the first quarter, Bloomberg reported.The Fed’s favorite inflation gauge, the core PCE index, rose at a 2.2% rate versus the 20-year average of 2.5%.The downward revision in growth was mainly the result of lower inventories than expected, which is a positive going forward.As well, personal spending was revised higher to 4.4%, the best rate in a year.Housing was less of a drag on growth than previously though, subtracting .9 percentage points from GDP.Moreover, personal income was revised higher for the fourth quarter of 2006, boosting the gain over the prior quarter to an annual rate of 5.9% from 4.7%.This is over twice most measures of inflation and suggests either payrolls have been undercounted or employees were paid more than estimated.I continue to believe US growth bottomed in 1Q as a result of dramatic inventory de-stocking and that growth is reaccelerating meaningfully this quarter and will approach average rates before year-end.

The number of Americans filing first-time claims for state unemployment benefits unexpectedly fell last week, pointing to strength in the labor market, Bloomberg reported.The four-week moving average of jobless claims rose slightly to 304,500.The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, held steady at a historically low 1.9%.I continue to believe the job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.

A measure of US business activity jumped more than forecast in May, signaling expansion for the third consecutive month and suggesting the economy is accelerating after bottoming in the first quarter, Bloomberg reported.The Chicago PMI has now exceeded 60 during two out of the last three months.The long-term average is 55.0.Moreover, the New Orders component of the index soared to 71.1 from 56.5 the prior month.The Prices Paid component rose to 70.2 versus 64.9 the prior month.The Employment component of the index rose to 57.3 versus 50.5 the prior month.I continue to believe manufacturing which subtracted from US growth substantially during 1Q will add to growth this quarter as companies rebuild depleted inventories.

Spending on US construction projects unexpectedly improved last month, as work increased on non-residential projects such as hotels and factories, Bloomberg reported.Private homebuilding fell to the lowest level since June 2004.Non-residential construction rose 1.1% in April and is up 13% from the same time last year.I continue to believe overall construction activity will remain muted throughout the year as homebuilders continue to work down inventories.

Korea Economic Daily:- An oil field OAO Rosneft is developing with South Korean companies may hold 10 billion barrels of oil, almost 300% more than initial estimates, citing South Korean government officials.

Commercial Times:- Taiwan retail investors have stepped up buying of US dollars as the local currency gained following attempts by the island’s central bank to shore up its value.Taiwan banks have had 20 or 30 percent more than usual retail customers in the past few days wanting to exchange local dollars into the US currency.

21st Century Business Herald:

- China is to start a tracking system in June to crack down on stock market speculation by state-owned enterprises, citing an official at the nation’s state assets agency.The nation’s state assets supervisor will also step up crackdowns on insider trading and share price manipulation, starting next month.

Xinhua News Agency:

- Eastmoney.com, a Chinese Web site that provides financial news and information, may raise $500 million in an IPO on the Nasdaq Stock Exchange.

BOTTOM LINE:Asian indices are higher, boosted by technology stocks in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

- Apple Inc.(AAPL) will replace MedImmune in the S&P 100.- US steel imports fell 26% in April as domestic prices dropped and service centers held off on new orders, an industry group said.- Gasoline futures fell to a three-week low on estimates a US Energy Department report tomorrow will show a fourth consecutive week of rising inventories, as some refineries increase production.- Jim Rogers, CEO of Beeland Interests Inc., sees more China measures to pop their stock “bubble.”- The Group of Eight leading industrial nations said they are ready to back tougher sanctions against Iran if the country fails to suspend uranium enrichment.

BOTTOM LINE: The Portfolio finished higher today on gains in my Internet longs, I-Banking longs, Retail longs and Computer longs.I added an (AKAM) trading long and added to a few energy-related shorts in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished mildly higher, sector performance was mostly positive and volume was above average. Measures of investor anxiety were about average into the close. Today's overall market action was very bullish.Once again, many stocks trounced the major averages today. True "growth stocks" were especially strong, with quite a few exhibiting explosive action. I still expect Google (GOOG) to exceed $600 and Apple (AAPL) to exceed $150 this year. These two stocks remain my two largest long positions.Despite the recent housing data, the August home price futures ticked up today to $214,800 from $214,400. I suspect today's whipsaw market action resulted in more investors leaning the wrong way. Performance anxiety is likely back in play in a big way. The Nikkei futures are indicating a 100-point gain in Japan on the open.Gold is falling another $4.30 per ounce on worries over emerging market demand and a report last night from London-based Virtual Metals that gold supply will exceed demand by 250 metric tons this year. The precious metal continues to trade very poorly given the numerous potential upside catalysts over the last year. I still expect a complete technical breakdown in gold before year-end.

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, I-Banking longs, Retail longs and Computer longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly positive as the advance/decline line is about even, most sectors are higher and volume is above average.Why is the myth that there is no oil demand destruction continuously perpetuated? Over the last three years global oil demand has only risen a total of 2.4% to 83.9 million barrels per day (OPCBRTOT Index on Bloomberg), while global economic growth has been the highest in over three decades, averaging near 5% annually. Global supplies (OPCBTSUP Index on Bloomberg) have risen 5.0% during that period to 85.6 million barrels per day. Just last year, global oil demand rose a paltry 0.9% while global growth boomed 5.3%. Moreover, oil consumption in the 30 OECD (Organization for Economic Co-operation and Development)countries actually fell 0.6% in the last year for the first time in over 20 years! These facts aren't possible without significant and pervasive global demand destruction. I believe the reason why the "no demand destruction" myth goes unchallenged in the media is that there has never been a time in U.S. history that more investors, analysts and pundits perceived that they benefit from high oil prices and they are positioned accordingly. Commercial hedgers, historically the smart money, remain net short crude despite record crack spreads and the onset of driving season. I continue to believe we have already seen the highs for the year in oil and gasoline prices. I expect US stocks to trade mixed into the close from current levels as buyout speculation, short-covering and investment manager performance anxiety offsets China bubble worries.

- Gold is falling another $4.70/oz. on speculation the US economy does not need a Fed rate cut, thus boosting the dollar and reducing demand for the precious metal.

- Federal Reserve officials acknowledged they underestimated to length of the US housing slowdown, while continuing to view inflation as the biggest threat to the economy, the release of the FOMC minutes showed.

- CBS Corp.(CBS) bought the music-focused social-networking site Last.fm for $280 million in cash.

- Palm Inc.(PALM) will start selling a portable computer in a bid to increase sales as its Treo mobile phone and e-mail device loses ground to the BlackBerry.

- China’s stocks plunged 6.8% last night, the most in three months, after the government tripled the tax on securities transactions to cool a rally that’s drawing more than 300,000 new investors a day.

Wall Street Journal:

- The SEC intends to review so-called 12b-1 fees, charged by mutual funds to compensate intermediaries such as brokers.

- Pizza chains in the US are losing market share as consumers seek more innovative products.

- Navistar International(NAVZ), the delisted parent of International Truck & Engine Co., may be a buyout target and its stock has risen as a result.

Politico:

- Former Tennessee Senator Fred Thompson is expected to announce his candidacy for the 2008 Republican presidential nomination in Nashville over the Fourth of July holiday, citing unidentified Thompson advisers.

CNBC:

- The NYSE will close one of four trading rooms later this year because of a drop in activity.

Economic Times:- India may increase the amount of money local mutual funds can invest in equity and debt abroad.

Securities Times:

- Some Chinese banks started internal probes to prevent customers from using loans to buy stocks as the benchmark index reaches new highs daily.Banks told branches to look more closely at loans for working capital and small business operations so they aren’t diverted into the stock market.

Late Buy/Sell Recommendations

Citigroup:

- Retailing-softlines short interest rose 8.5% in May to a record 257,000,000 shares short on the heels of a prior peak in April on lingering worries over consumer spending.Retailers with the most significant increases in short interest include ANN +38%, CHRS +35%, CTR +29%, MW&URGI +26%, ANF/CMRG/LTD +25%, CBK +24%, GPS +23%, TJX +22%, DBRN +20%, CHIC +21%, TUES&ARO +15%, HOTT +12% and BEBE/PLCE/ROST +11%.

BOTTOM LINE:Asian indices are lower, weighed down by commodity and automaker stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.

Afternoon/Evening HeadlinesBloomberg:- The private-equity boom will continue in the next few years as near-record-low borrowing costs keep buyouts affordable, KKR co-founder Henry Kravis said.- Shares of Coldwater Creek(CWTR), the Idaho-based women’s clothing retailer, soared as much as 15% after-hours as first-quarter profit unexpectedly rose.- Cotton futures declined 2.2% in NY on speculation the US may miss government export forecasts on cooling demand from China.- Coffee had its biggest decline in six weeks, falling 2%, on expectations that favorable weather will aid crops in Brazil, the world’s largest producer.- Corn fell 3% to a two-week low in Chicago and soybeans dropped 1.9% after rains boosted moisture levels in fields east of the Mississippi River, increasing yield potential for the two biggest US crops.- Gasoline futures in NY plunged 4.4%, the most in seven months, on estimates that gasoline supplies rose for the fourth consecutive week, which curtailed investment fund speculation on the commodity.- Robert Zoellick, the former US trade representative and an executive at Goldman Sachs Group(GS), will be nominated by President Bush to replace Paul Wolfowitz as head of the World Bank, a senior administration official said.- Broadcom(BRCM) won a $19.6 million verdict after a California jury ruled rival Qualcomm(QCOM) intentionally infringed three patents for mobile-phone technology.

- Nationwide gasoline prices at the pump fell $.01/gallon, breaking a string of increases, to $3.21/gallon, a government report said.

BOTTOM LINE: The Portfolio finished higher today on gains in my Internet longs, I-Banking longs and Energy-related shorts.I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished higher, sector performance was mostly positive and volume was below average. Measures of investor anxiety were about average into the close. Today's overall market action was mildly bullish.Small-caps and mid-caps outperformed throughout the day. The U.S. dollar recouped morning losses, finishing unchanged. The 10-year yield was up 3 basis points on the home price data and better-than-expected consumer confidence reading. Gasoline futures are near session lows, falling 4.4%. This is significant. It appears to me the gasoline crack spread is finally breaking down, as well. The iShares FTSE/Xinhua China 25 (FXI) finished off session lows, falling 1.2% on news of increased trading fees for investors in China. Google (GOOG) finished off session highs, rising $3.59, but it has broken out of its recent downtrend. I suspect another attack on $500 is imminent and I expect it to hold this time.

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, I-Banking longs and Energy-related shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are higher and volume is below-average.The Yale School of Management Crash Confidence Index is showing the individual (herd) is the most concerned about a stock market crash since December 2002, right near the trough of one of the worst bear markets in U.S. history. This is another amazing number and helps to illustrate how deep-seeded the herd's pessimism towards U.S. stocks really is, in my opinion. Notwithstanding any weekly or monthly blips higher in various measures of investor confidence, I continue to believe overall investor sentiment regarding U.S. stocks has never been worse in history with the DJIA just off fresh record highs. This has to be very disturbing to the many U.S. secular bears. I expect US stocks to trade modestly higher into the close from current levels on buyout speculation, lower energy prices and more economic optimism.

- China’s Ministry of Public Security warned investors not to fall for scams aimed at capitalizing on enthusiasm over a rapidly rising stock market, such as false initial share offerings or fake investment funds.

- Crude oil is dropping $2.03/bbl. in NY as investment fund speculation subsided after an end to a strike in Nigeria and on expectations that supplies are adequate.

- Stephen Schork, an energy investor and president of Schork Group sees lower gas prices during the summer driving season.

- The Bank of Canada said for the first time in a year that it’s ready to increase interest rates because inflation is accelerating faster than it expected.

- Trading in options to buy shares of Commerce Bancorp(CBH) surged ninefold to a six-week high after the largest bank based in NJ canceled an appearance tomorrow at a Sanford C. Bernstein conference.

- President Bush imposed economic sanctions against Sudan in a bid to curb the violence in Darfur and he called on the UN to step up financial pressure on a leader who hasn’t stopped genocide in the war-torn African country.

Wall Street Journal:

- CDW Corp.(CDWC), one of the biggest US resellers of computers, software and related equipment, may be bought by a private-equity firm.

- US investors in mutual and hedge funds may benefit in coming years as more and more managers depend on third-party providers for internal monitoring and risk management.

NY Times:

- US lawmakers are pushing to subsidize coal as an alternative fuel.Democrat and Republican lawmakers are proposing to guarantee billions of dollars in construction loans for coal-to-liquid production plants, guarantee prices and future government purchases.

- Consumer Confidence for May rose to 108.0 versus estimates of 105.0 and an upwardly revised 106.3 in April.

BOTTOM LINE:An index of consumer confidence in the US jumped more than forecast in May as rising stock prices and a resilient labor market put Americans in a mood to spend.Better consumer sentiment raises the odds that the Fed’s forecast for accelerating economic activity will come to fruition.The Present Conditions component of the index rose to 136.1 from 133.5 the prior month.The Expectations component rose to 89.2 from 88.2 prior.The percentage of Americans that said jobs are hard to get fell to 19.9% from 20.4% in April.A 2.9% surge in the S&P 500 from the last week in April through May 22 also buoyed confidence.A $3.22/gallon nationwide average gas price on May 22 likely prevented an even greater jump in the reading.

34.4% of consumer said they plan to purchase a “major appliance,” the highest since May 1998 and up 10% from April.Moreover, this number has only been higher during 2 other months(March and May of 1998) over the last 19 years.This is very significant considering the percent that plan to purchase a major appliance is higher now than at any time during the peak of the recent housing boom.This is likely due to the fact that Americans’ net worth is at an all-time high as a result of the 106% gain in the stock market since the October 2002 bottom, a healthy job market, low interest rates, below average inflation and a 127.3% gain(Case-Shiller Home Price Index) in home prices over the last decade.These facts continue to be ignored by those that have expected consumer spending to fall off a cliff over the last couple of years as a result of housing.

The gain in the overall reading was spurred by a 19.2% jump in the Northeast Central region.However, the overall gauge continues to be skewed negatively by depressed confidence in the northern part of the country where most investment funds and major media outlets are located.Here is a breakdown of today’s Consumer Confidence reading by region:

- President Bush, in a Memorial Day weekend radio address, said the wars in Iraq and Afghanistan are aimed at promoting in those countries the freedom people enjoy in the US.

- Overseas stock exchanges including NYSE Euronext(NYX) and Nasdaq Stock Market(NDAQ) said they plan to open offices in China for the first time, amid efforts to woo Chinese companies to their bourses.

- Google’s(GOOG) $3.1 billion acquisition of online advertiser DoubleClick Inc.(DCLK) led the US FTC to top a preliminary antitrust probe into the purchase.

Washington Post:- Ryan Crocker, US ambassador in Baghdad, will tell Iranian diplomats how the Islamic republic can help stabilize Iraq, both militarily and politically, during talks in Baghdad tomorrow.

Newsweek:- US intelligence has identified a secret Iranian group called Department 9000 as the unit behind Tehran’s efforts to support Shiite insurgent cells in Iraq.

AP:

- To deal with high gas prices, 47% of the 1,000 Americans polled said they were considering buying a more fuel-efficient vehicle versus 39% last year, according to an AP-Ipsos poll.

Sunday Telegraph:- Coca-Cola Co.(KO) is in talks to buy the Highland Spring Ltd. bottled water company for as much as $992.3 million.

Sunday Times:- The Dubai International Financial Centre may block Nasdaq Stock Market’s(NDAQ) acquisition of Sweden’s OMX AB by making its own bid.

BBC:- World Bank President Paul Wolfowitz, who plans to resign June 30, says the media was a bigger factor in his decision to leave the lender than his standing among bank employees.The bank’s board agreed he hadn’t done anything unethical with regard to compensation for a bank worker who was his girlfriend.

Nikkei English News:- Toshiba Corp. will start using Advanced Micro Devices(AMD) chips in some products to cut costs.

South China Morning Post:- The Chinese Central government has asked local officials to stop offering tax and power incentives to energy-intensive industries.

Shanghai Securities News:- China may have more than 100 million stock market accounts as of yesterday, as new investors stormed in to tap a record share rally.The value of shares in China surged more than 600% in the past two years to $2.4 trillion.So far this year, about 20.9 million accounts have been opened at brokerages, 400% more than the entire amount in 2006.

Xinhua News Agency:

- China won’t meet its energy efficiency targets if annual economic growth reaches 9% or higher, citing the deputy head of energy efficiency research at the nation’s top planning agency.

- China’s government may soon let citizens buy stocks overseas, broadening an investment program that currently only allows banks to invest abroad.Chinese brokerages and fund management companies may also be allowed to invest abroad as qualified domestic institutional investors.

Chosun Ilbo:

- North Korean dictator Kim Jong Il may be ill, citing a South Korean government official.

Emirates Today:- Taxis in Dubai will be converted into more environmentally friendly “duel fuel” vehicles that will use electricity as well as gasoline.

Al-Ahram:- Egypt is expected to produce eight metric tons of gold next year, one ton more than its entire production in the past 100 years, citing a government official.The increase is expected following new government regulations that encourage foreign companies to explore for gold.

Weekend RecommendationsBarron's:- Made positive comments on (LWSN) and (ARC).- Made negative comments on (JSDA).

Morgan Stanley:

- As China’s Shanghai A-share market continues to rise rapidly despite historically high valuations, fears of serious consequences from a potential burst of the stock market bubble have intensified greatly in recent weeks.However, on examination of household and corporate exposure to the stock market, we conclude that the negative wealth effect on consumption would be moderate and financing conditions for corporate investments would be unlikely to deteriorate significantly in the aftermath of such a burst.The potential impact on the banking sector is much more difficult to gauge, given the paucity of data.However, our stress test suggests that the impact on banks’ balance sheets would, while significant, likely be manageable.A major correction of the A-share market could well result in a significant contagion to global markets, as seen during February’s short-lived correction.However, to the extent that any such global sell-off were driven by concerns about a stock-market-correction-triggered-recession in China’s real economy, it would likely prove overdone, in our view.We think the risk of a much more serious impact from a potential stock market correction will heighten significantly if Chinese shares continue rising rapidly from current levels.

BOTTOM LINE: Asian indices are higher, boosted by technology and financial shares in the region. I expect US stocks to open mixed and to rally into the afternoon finishing modestly higher. The Portfolio is 100% net long heading into the week.

The positions and strategies discussed on BETWEEN THE HEDGES are offered for entertainment purposes only and are in no way intended to serve as personal investing advice. Readers should not make any investment decision without first conducting their own thorough due diligence. Readers should assume the editor of this blog holds a position in any securities discussed, recommended or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in anyway, considered liable for the investment performance of any securities or strategies discussed.